The Labor Shortage Behind High Home Prices : Planet Money : The Indicator from Planet Money Demand for homes has increased dramatically this year and supply can't keep up. One of the biggest issues is a labor shortage in the construction industry. So employers are increasing wages and getting creative to entice people into the trades.

Desperately Seeking Construction Workers

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

DARIAN WOODS, HOST:

And I'm Darian Woods. Today's construction spending numbers are out this morning with residential construction increasing 0.2% April to May and 28% over the last year. It's a white-knuckled hot pace for housing. We've got a lot of construction - houses, remodeling, apartments, condos.

(​SOUNDBITE OF CONSTRUCTION AMBIENCE)

WOODS: Stacey, this is the serene sounds of some...

VANEK SMITH: (Laughter).

WOODS: ...Steel being unloaded at a construction site near my apartment in New York.

VANEK SMITH: Similar serene sounds near my apartment as well, yes - so much serenity in New York. That's why we all live here, right?

WOODS: And everywhere in the U.S., the hills are alive with the sound of rebar...

VANEK SMITH: (Laughter).

WOODS: ...And also hammers and really loud drills.

VANEK SMITH: I mean, it is a fantastic time to be a homebuilder. Home prices have shot up in the last year 24%. That is massive. House prices are screaming, build, build, build. I mean, that way there would be more houses. There would be more supply to fit the demand so prices wouldn't be going up so, so, so much for the few houses there are.

WOODS: And yet.

VANEK SMITH: And yet in this economy, of course, nothing is that simple.

WOODS: Can you just list off all the reasons why construction can't ramp up as fast as it would like to?

RICK PALACIOS JR: Oh, my gosh.

WOODS: (Laughter).

PALACIOS: There's...

WOODS: I've got all day.

VANEK SMITH: There are a lot of forces holding home construction back, says Rick Palacios Jr. He is the director of research at John Burns Real Estate Consulting. First up, he says, land.

PALACIOS: Hard to find land, hard to entitle land.

WOODS: Also, lumber prices have been astronomical. Steel prices are still high. And there are a lot of materials where, because of shipping bottlenecks, you wouldn't even know if they're going to arrive on time.

VANEK SMITH: But one of the biggest obstacles right now, says Rick, hiring. A lot of companies cannot find enough workers.

PALACIOS: Think about electricians. Think about finish carpenters. That's actually where we're seeing some of the biggest issues. It's with those specialty trades.

VANEK SMITH: Today on the show - desperately seeking construction workers. After all, these are jobs that require a lot of skill, a lot of training. And so we want to learn how companies are enticing people into these trades to keep, you know, the cement mixers mixing and the hammers hammering.

(SOUNDBITE OF MUSIC)

WOODS: When I asked Brandy McCombs how she got into the construction trades, she answered with one word.

BRANDY MCCOMBS: (Laughter) Accident - I needed a day job. I was trying to raise a family, and I ended up working for a mechanical, electrical and plumbing contractor in their service department.

VANEK SMITH: This accident led to a career in construction.

MCCOMBS: I started with boots on ground. I was in the field, in the trenches, did it. And then I went into the office. And then now here I am, owning my own company.

WOODS: Brandy started her Kansas City-based carpentry company IBC in 2008, and she hasn't ever looked back. But there is one major headache.

What's the biggest barrier to expanding to kind of meet the demand?

MCCOMBS: Workforce - having the skilled trades to perform the work.

VANEK SMITH: Of course, if you told this story to a lot of economists, they would have a very fast answer for you, which is raise the wages.

WOODS: Why not just pay more?

MCCOMBS: We do. So at hourly, all-in wage, we probably start at about $45 - then. Now we're at 65.

WOODS: Wow. I mean, the numbers you're giving out - I mean, these are decent upper-middle-class wages. These are not - they're not even middle-income wages.

MCCOMBS: Yes.

VANEK SMITH: So that's $65 an hour. It does include benefits, and it is about double the median wage in the U.S. But still, it hasn't been enough to get the workers Brandy needs. And so she has started advertising another perk, especially for those hard-to-fill senior roles - the use of a vehicle.

WOODS: I assume it's a truck, pickup truck.

MCCOMBS: Oh, yeah.

WOODS: (Laughter).

MCCOMBS: It's an F-150. Are you sure you don't want a job?

VANEK SMITH: She's trying to recruit you, too, Darian.

WOODS: I know. No one is immune.

VANEK SMITH: But, like, this kind of thing, this kind of very aggressive recruiting, this is happening all over the country. Rick Palacios Jr. says he's seen this in his research on the real estate industry.

PALACIOS: It's been a structural issue for the homebuilding space really since, I would call it, maybe 2009, 2010 when we exited that recession, albeit slowly. It has been a structural impediment, I would say, that perhaps has accelerated coming out of COVID. Everybody is after the same thing. There's insatiable demand. We can't build it fast enough. We've got to go out and compete and all - how that all manifests itself is higher wages.

WOODS: The average hourly wage in construction is now just over $32 an hour. And those higher wages - excellent news for the construction workers, of course. But why hasn't that attracted enough new workers for the industry?

VANEK SMITH: Of course, one thing about construction work is that it is really hard, and there are a lot of dangers involved. I mean, you're out there in the sun every day, lots of safety risks.

WOODS: And in the early 2000s, the construction industry just brought on board a lot of people from other countries. The inflow of immigrants into construction, both legal and undocumented, was really high.

PALACIOS: The industry does rely on immigrants historically, right? And that's not a political statement. That's hard statistics. You know, we haven't had the friendliest of policies there over the last several years. And stripping politics out of it, I mean, homebuilders that we talk to tell us time and time again, look; we need people to do these jobs. We saw a lot of those people leave the industry after the great financial crisis. They did not come back, and that's caused a big issue for homebuilders ever since.

VANEK SMITH: Construction is notorious for its boom-and-bust cycles. And the Great Recession of 2008 just annihilated the construction industry. And that, of course, has contributed to the perception that construction work is unstable, and it has kept workers away.

PALACIOS: The volatility of the industry definitely has played a role in people leaving the industry, namely after the great financial crisis.

VANEK SMITH: So Brandy, our carpentry business owner, she is focusing right now on the things she can control. So she is offering higher wages and the use of a pickup truck. But she's also going into high schools, talking with teenagers, saying, hey, there is a career path for you in construction. In fact, she says next week, she's joining a camp for girls to give them a taste of what a career in construction might be like.

MCCOMBS: They do plumbing. And then the next day, they do welding. The next day, they do carpentry and - to get them familiarized with what options they do have.

WOODS: And Brandy tells them that there are a lot of benefits to the trades. Like, a trade school is typically a lot cheaper than an expensive four-year college.

MCCOMBS: They have no student debt. They're getting on-the-site training. So they're making, at the minimum, $25 an hour.

VANEK SMITH: And through this outreach, Brandy says, she has helped to shape some teenagers' lives and partly solve her own hiring problem. She uses the example of a young woman she met in Kansas City.

MCCOMBS: She had no idea - again, no idea. Her mom was a teacher at a local community college. Her dad was a UPS driver and didn't know anything about construction.

WOODS: Brandy gave this young woman an internship at her company. It went really well. And a few years after the internship, she ran into the young woman again when she was in college.

MCCOMBS: She went to Mizzou, and then she came back.

WOODS: She came back and actually interviewed Brandy, which was part of this young woman's capstone project for her engineering degree.

MCCOMBS: And I was like, oh, full circle. And that right there is what it's all about. When someone says, well, why did you do it? And why do you do the things I do? - because that was worth every moment I spent with that girl.

VANEK SMITH: Now all Brandy has to do is find dozens more people like that.

(SOUNDBITE OF MUSIC)

WOODS: Tweet at us. We are @TheIndicator. And please send us an email. Type in indicator@npr.org. We would love to hear from you.

VANEK SMITH: Today's episode was produced by Julia Ritchie (ph) and Emma Peaslee with help from Gilly Moon. It was fact-checked by Michael He. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.

(SOUNDBITE OF MUSIC)

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